Matahari's steps in awaiting value migration

Matahari's steps in awaiting value migration

E-commerce is still considered a luxury in Indonesia, especially considering the fact that e-commerce infrastructure is not yet cheaply available countrywide. And in the current hard economic conditions, with the rupiah still very low against the U.S. dollar, it is almost impossible to build e-commerce infrastructure widely and cheaply. Therefore, businesses which have the potential to be affected by value migration due to e- commerce still exist.

But, this does not automatically mean that these businesses can exist peacefully, ignoring the threat. E-commerce, however, depends on telecommunications and the Internet. There is, in fact, another mode which enables the emergence of businesses like e-commerce, such as home shopping services through television or just telephones.

This change is unavoidable because everywhere in the world there is always a change in the business model, which leads to more power for the customers. Business was initially determined by manufacturers; they were in the position of pushing their interest to the customers. Just remember the popular quote by Ford automotive industry founder Henry Ford: "You can choose any color as long as it's black."

Yet, the dominance of the manufacturer began to fade when the number of manufacturers began to increase drastically and the customers were becoming smarter. The large number of players did, indeed, increase choices but, customers usually wanted to choose products that were offered easily and comfortably. This kind of condition led to the mushrooming of supermarkets, department stores and, more recently, specialty stores.

In such a condition, intermediaries like supermarkets, department stores and specialty stores were able to obtain a power which was even stronger than that of the manufacturers and customers. With the capability to lure prospective customers, they could finally determine the types of products that could be offered by manufacturers to the customers.

It can be acknowledged that in their efforts to attract prospective customers, supermarkets, department stores and specialty stores always rely on context differentiation: trying to sell an atmosphere. That's why, in the condition where supermarkets, department stores and specialty stores still play the key role, customers frequently carry out their buying activities not only for shopping but also for recreation. However, context differentiation is not always dependable, especially when the customers are faced with shortcomings like time and distance. So they will usually take into consideration the ease with which to get their needs and cheap prices. To overcome this problem, they usually try to create a new differentiation, so that they can continue to attract prospective customers to their premises. This kind of effort leads to the use of private labels (house brands), where they label products as their own.

Generally, house brands comprise daily basic household goods, such as sugar, rice and even drinks. The most important thing is that they are for daily consumption. Why? Because for daily consumption products, besides quality, price usually becomes the main consideration. The functional benefit. While the emotional benefit usually becomes a secondary reason.

Though they can actually house-label other products, including those other than routine household needs, still, not many retailers or specialty stores leverage their brand-equity by using private labels. Therefore, the decision taken by the Matahari Department Store to launch Stanley Adams is clearly an interesting phenomenon. Matahari is the biggest department store chain in Indonesia. It launched its own brand, Galeria, to capture the class-A and class-B economic strata. In its department stores, Matahari has, of course, become the place for many local and foreign garment producers to promote their products.

Matahari has not only been successful as a department store, but has also become a trendsetter for the Indonesian people's lifestyle. Matahari has succeeded in pushing changes in the shopping behavior of Indonesians, besides having a strong position to attract prospective customers. In short, Matahari has a clear position. Therefore, they want to leverage their brand- equity by launching private labeling. It is interesting that Matahari does this for its garment products, which are not routine household needs.

Matahari seems serious in launching its private label for its garment products Stanley Adams. This is understandable since the products are introduced amid tight competition with renowned brands already occupying Matahari counters, such as Valino, Arrow, Piere Cardin and Saville Row. Therefore, Stanley Adams cannot only take advantage of the opportunity as a product made and owned by the department store but must rely on its brand- equity.

What does Stanley Adams need to do for this? First, by showing it has quality. And Matahari clearly carries this out through its Pin Poin, which is the garment's fabric composition attached to the item's label, like clarifying a special weaving technique using 100 percent cotton, fabric which is nonwrinkle, soft, comfortable to wear, long lasting and easy to maintain.

Second, inexpensive pricing. The price could be between 30 percent and 40 percent cheaper compared to other products of the same quality. This is made possible by the fact that Stanley Adams can save storage costs and distribute its products to all Matahari counters economically. The third step is by launching a loyalty program through offering special facilities and gifts to loyal customers. These three ways of building brand-equity proved effective; the Stanley Adams brand quickly gained popularity.

Of course, the success in building this brand-equity has had a positive impact for Matahari and Galeria, which have become exclusive places to sell Stanley Adams. Nationwide, Matahari has gained a respected context differentiation which attracts customers. This is an interesting phenomenon. Matahari has managed to build a bastion which will help minimize the possibility of value migration from shopping at department stores to home shopping. Taufik